Debt Relief for Service Members

Debt Relief for Service Members
by: Lisa Zapalac


Americans' personal debt reached $2.6 trillion earlier this year, and the
men and women of the nation's armed forces have felt their share of
financial pain. However, a nearly 70-year-old law is helping to ease the
debt burden for those called to actively serve their country.

Financial protections for service members exist in the form of the
Servicemembers' Civil Relief Act (SCRA). Under the law, called the
Soldiers and Sailors Civil Relief Act when it was written in 1940 until
it was renamed and updated in 2003, lenders must cap at 6 percent the
interest rates on loans military service members incurred prior to
becoming active.

The 6 percent interest cap applies to any charges -- including credit
card debt, service charges and renewal charges or fees -- except bona
fide insurance. The act specifies that in order to receive the interest
rate reduction, a service member must request it in writing and include a
copy of his or her military orders. Additional protections include:

Reduced interest rates on mortgage payments.

Protection from eviction if your rent is $1,200 or less.

Delay of all civil court actions, such as bankruptcy, foreclosure or
divorce proceedings.

The promise that service members who claim any of the law's protections
would not feel adverse effects on their credit reports or be refused
future credit because of it. (This protection was added during the 2003
revision of the law.)

Some credit card companies even go beyond what the law requires and offer
additional benefits to service members. However, many lenders simply
ignore its requirements, says Cari Auclair, who runs the American
Military Debt Management Services, a service unaffiliated with the
military but that counsels and advises members of the military who are
struggling with debt. There are criminal penalties in many sections of
the SCRA for violations of the act. Additionally, many sections preserve
service members' basic right to bring lawsuits to protect additional
legal rights independent of the SCRA.

Numbers show that U.S. military men and women can use the help, even
though there is some dispute regarding the extent of their debt
difficulties. A 2006 Associated Press review of records from the Navy,
Marines and Air Force revealed a staggering increase in the number of
soldiers who had their clearances to be deployed around the world revoked
as a result of personal debt. The AP found that among the branches that
provided information, the number of clearances revoked because of debt
climbed from 284 in 2002 to 2,654 in 2005 -- a 935 percent spike.

On the other hand, surveys conducted between 2002 and April 2007 by the
Defense Manpower Data Center (DMDC) and the Department of Defense reveal
quite the opposite.


"Data show a downward trend in active-duty service members reporting
difficulty maintaining their finances,"

says Defense Department spokeswoman Eileen M. Lainez. "Information on
financial health gathered at that time shows that the vast majority of
military members were not reporting financial difficulty paying their
rent or mortgage. Over the past three years, more service members have
reported saving for their future."

Air Force Staff Sgt. Brandon Jacobson also denies that personal debt is
any bigger a problem in the military than in the civilian world. He runs
a financial blog called Money for Military and points out that servicemen
and women even have some extra advantages that can help them steer clear
of debt.

"The military is actually provided more protections: free education,
financial assistance that civilian companies would love to charge for,
the service members' Civil Relief Act, and lending protection," says
Jacobson, currently stationed at Beale Air Force Base outside Sacramento,
Calif. "I wouldn't say we're any more susceptible to being in debt than
civilians."

However, Jacobson did recently help a friend on base claim the act's
interest rate reduction. When the friend approached Jacobson for some
financial advice regarding her mounting personal debt, Jacobson noticed
that the majority of her debt -- including credit card debt and car
payments compounding at 16 percent interest -- had accrued before she
joined the Air Force.

"Four of the credit card companies dropped the interest rate down to 6
percent right away," says Jacobson. "On the car loan, she faxed them her
military orders, and they dropped it to 6 percent right away. That's a
better rate than I had on my first car."

The interest cap provision also targets the common practice of payday
lending, which has been shown to prey upon service members with the
promise of a same-day cash loan in exchange for any form of
identification and a post-dated check. The catch: sky-high annual
interest rates that can exceed 400 percent.

And in a time when home foreclosures in the military outnumber those in
the civilian world four-to-one, the SCRA provides the same 6 percent cap
to pre-service mortgages and prevents foreclosure while a service member
is on active duty.

This is serious business to the armed forces. As a rule, the military
views personal debt as a risk to both individual service members and the
interests of the armed forces overseas, as the stress of soldiers'
financial battles back home may distract them from their primary mission
or -- even worse - tempt them to sell secrets to our enemies.

American Military Debt Management Services' Auclair points to what she
views as low pay in the military, the difficulty for spouses seeking new
jobs when a service member is transferred, and the rising cost of living
as contributing to the problem of military personnel's increased debt
load.

"It's a mess," says Auclair. "I've had clients over in Hawaii who can't
even afford to turn their cable on because of the cost of living over
there, and the stipend that the government gives doesn't cover what the
actual cost of living is in an area that is over inflated."

Auclair also dispels the myth that the victims of military debt are
primarily the younger, lower-ranked soldiers who are seeing a steady
income for the first time in their lives.

"After looking at this industry over the last 10 years, I think that the
majority of our clients are not the younger soldiers," she says. "They
are the mid-level officers -- generally not second lieutenants, usually
first lieutenants and up. The reason being, they've had time now to
establish a family and the increases that they're supposed to get paid
don't cover the family costs, and they've had time to rack up the debt."

"Very rarely do we get a younger service member who's just gone hog wild."

To get more details on the act, and to begin the process of applying for
relief, visit the military's Civil Relief Act Web site, run by the
Defense Manpower Data Center.

---

About The Author
Lisa Zapalac
Vice President, Co-Founder
Public Relations Community/Realtor Affairs
281-692-1400
http://www.casanuevaguide.com